We begin another year with much the same
intensity that we’ve maintained over the last two years. Though it would be
nice to settle in for a bit and give our newer board members more time to learn
more about our work, that peaceful period just isn’t in the cards right now.
This month we have been battling Mother Nature, and changes to our cable
television lineup, right along with our work to accomplish the terms of our
agreement with the Advisory Council and the City Council, and all of these
tasks have been quite difficult.

We are doing the annual review of the
effectiveness of our retail electric rates and working to present them to you,
along with recommendations on how to also achieve the $5 reduction to some
Customer Charges, at this meeting. While it would be nice to wait for D.T.
Froedge to arrive before we delve into that, the schedule, if we are to accomplish
this by April, is unforgiving. We need to go over this in January, present
actual, fleshed out, rate designs in February for your approval, and then get a
number of TVA required tasks completed before April 1. There is no slack time
in the schedule.

The meeting might be a bit long, depending
on the level of questions that you have about my rate presentation, so try to
grab a snack before you arrive. Now, let’s move on to this month’s agenda!

February 1
FCA

As we continue the third year of our new retail rate designs, February
1 will bring us a small increase in overall power cost due to a small increase
in the FCA. Since energy sales have been off slightly (that will change
dramatically when January is accounted for), compared to what TVA anticipated,
and hydro generation was considerably lower than anticipated, fuel costs were a
bit higher, and that is the root cause of the smallish FCA increase. The February
2018 FCA is going to increase about 0.5% to 1.844 cents per kWh. As usual, I am
attaching the narrative on the FCA from the TVA portal. On February 1, the
energy component of our retail rates will be adjusted to reflect this increase
to the wholesale cost of energy.

The product delivers these benefits to the customers, and
EPB benefits as well. The progress we have made of the last couple of years in
reducing our bad debts written off is largely attributed to the iPay product
reducing our exposure. However, weather events like what we have experienced
this month, threaten to decrease the benefits we are getting from the creation
of the iPay product.

We will discuss this more fully at the meeting, but issues
have arisen due to the very nature of the pre-pay product. According to the
rules we set forth for the product, the customer accepts full responsibility
for monitoring their credit balance on their account. They accept the terms
which include automatic termination of the services covered by their iPay
account, whenever the balance in the account falls below zero. Obviously, this
is the nature of pre-pay, and it is the only way that EPB can hope to protect
its fiscal status when there is no deposit held with respect to an account. If
one is on pre-pay, and they do not pre-pay to purchase their services, then the
services are terminated.

The severe weather has brought many surprises to many of
the iPay users. First, their energy usage has been dramatically higher,
requiring more money deposited to the accounts to maintain a positive balance.
Next, even though we strongly advise customers not to do so, many come by
nearly every day to place a small amount of money on their account. When road
conditions are such that these daily visits become impossible, they are faced
with a negative balance on their account, which, by our rules and their
agreement, results in service termination. If the weather is frigid, those
terminations could have many negative results to health and property.

Though we have stepped in many times over the last two
weeks to keep services active, even though the customers have agreed to
automatic termination, we are breaking our own policies and exposing our other
customers to new bad debt risk. While we understand that one side of this
problem is a simple monetary one, we also recognize that the other side of the
issue deals with health and welfare of many customers. There is no clear proper
response to the conditions that have developed this winter. We can discuss this
further during the meeting.

Programming Committee
Member Replacements

The terms of Terrell
Alexander and Beverly Vance expire at the end of January. Terrell is finishing
his first full term. Beverly was appointed to fill the unexpired term of Janice
Crenshaw, so she hasn’t served two full
terms yet. The board has been limiting these appointments to two full terms, so
you have some options, and, of course, the two full terms limitation is one
previous boards have created and can be modified. Both of these folks have been
great members of the committee, but you should be pondering their replacement,
or reappointment now.

Retail Rate
Effectiveness and the Path to the $5 Customer Charge Reduction

The only recommendations of the Advisory Council, empaneled last year to
come up with recommended changes to EPB’s policies and retail rates, which have
not been addressed are on the agenda this month. We finally have sufficient
data to complete the first annual recommended analysis of our retail rates. We
are also now able to make recommendations on how to implement the requested $5
reduction to the Customer Charge for low kWh usage residential customers. The
discussion of these two matters will be somewhat lengthy and detailed.

I will start the discussion by giving everyone a refresher course on retail
electric rate design, and the forces acting upon Glasgow that led the board to
approve our sweeping rate changes two years ago. I have new graphics that
should help refresh the experienced board members and help the newer members
catch up on what transpired.

After the refresher, we will move into the review of the effectiveness of
the existing retail rates. This will satisfy one of the Advisory Council
recommendations and it will also provide a good foundation for recommended
adjustments to our rates that should be before you at the February meeting.

Finally, we will use the refresher course and the presentation on
existing rate effectiveness, to open the discussion on methods that might be
used to produce the $5 Customer Charge reduction. This is the last outstanding
Advisory Council recommendation that we have yet to address, and it is one of
the toughest. Since we are a not-for-profit municipal corporation, we cannot
simply finance a benefit, that will cost about $30,000 per month, by reducing
dividends to stock holders. Rather, we will have to harvest that $30,000 per
month from somewhere else to be able to provide the $5 reduction to all
residential customers.

So, the tough question before you will be the decision on where to
collect the revenue necessary to provide that benefit. Should we raise some
rates to commercial and industrial customers and use that to provide benefits
to the residential customers? Should we, instead, adjust residential energy
rates so as to collect an average of $5 more from each customer so that money
can be used to reduce the Customer Charge?

The third part of the presentation will attempt to allow you to see the
impacts of these options, so you can render a decision on which route you feel
is best for us to pursue. My team will have a lot of work to do after your
decision, as we will need TVA approval, and I will have to present our
recommendation to the City Council as well. We want to get all of this done
such that we can make whatever changes you deem necessary for implementation on
April 1. That means every day will count throughout the upcoming months.

Progress on Advisory Council Recommendations

This seems a bit
redundant since many of the paragraphs above already deal with this subject,
but just to keep our consistency on including this in our discussion until all
items are completed, here it is. I won’t repeat all here in their entirety, but
will use shorter summary terms for each item. The information presented here
will be repeated and expounded upon at the meeting for your consideration.

1.Tiered Customer Charge
Based Upon Usage.
This is the toughest one of the recommendations for us to make progress on, but
we did discuss it enough to target a $5 reduction in the customer charge for
the lowest usage “tier,” as recommended by the Advisory Council. I’m afraid
that this decision has been misinterpreted by some as a promise to lower all
customer charges by $5. The Council asked for a tiered customer charge with
reduction for the lower kWh usage customers. That is the job we are working on
as directed to my team at the August Board meeting. Additionally, TVA is going
to start charging us a new wholesale customer charge, and since our present
rate architecture collects all of the money we need to operate the grid from
the customer charge, the base customer charge will have to cover this new
expense. That is not even recognizing the possible $400,000 annual cost
increase that Kentucky Retirement might saddle us with. A $5 credit would
soften those increases and provide the gradualism, as we slowly reduce that
credit over the next few years, but that credit will have to be funded by an
increase somewhere else. Please remember, the EPB is a non-profit corporation
which does not have the financial resources to simply reduce any charge without
offsetting that reduction with an increase to another charge to balance the
ledger. As discussed extensively above, we are about to address this item.

2. Revisions to Variable Rate. The requested
revisions have already been implemented, effective August 1. The council asked
us to limit our peak predictions to a maximum of 4 days per month. Accepting
that recommendation causes us to move away from the technically elegant
architecture of the former infotricity rate, wherein everyone pays their
pro-rata share of the monthly peak hour, no matter when it occurs. The new
limitations we accepted create risk of paying TVA for a peak hour which is not
properly predicted and shared among all customers. That risk is monetary and we
must create a fund balance to use when those missed predictions occur, because
TVA must be paid regardless of the accuracy of our predictions.

3. Alternative Rate Considerations. This is one of the
most unusual recommendations from the Council. The suggestion here is that we
poll our customers (we assume just those actually using the Alternative Rate -
TRS and TGSA1) to ascertain their interest in modifying the rate to introduce
time-of-use elements to the rate. This feels odd because everyone we know that
went to the Alternative Rate, did so because they sought the solace and
simplicity of an old-style kWh rate with fixed kWh charges. Still, we agreed to
pursue each of the recommendations, so we sent out first class mail survey to
about 1,500 folks on the alternative rate. We got the forms back from 14
customers. Most of those responses asked for the alternative, or “flat” rate,
to be altered by adding a time-of-use element to the rate. As a result of this
response, I believe we can count this recommendation as satisfied and that the
rate design, as it stands, is preferable to an overwhelming majority of those
using it.

4. Improvement to RoundUp Product. The recommendation
here was quite simple. We were asked to modify the product such that anyone
interested in participating could choose a fixed amount to be automatically
added to their monthly bill and then donated to Community Relief. The objective
here seems to have been to gather more funds for the use of Community Relief,
by increasing the amount donated by a participant beyond the sub-one dollar
amount achieved by simple rounding up of the bill to the next highest even
dollar. We found that the software could easily be adapted to do this and we
have already accomplished this change. We still need to create marketing to
better inform the customers of this change, and that is in process.

5. Annual Rate Review. The recommendation was
that we conduct an annual review of the effectiveness of all retail rates, and
recommend changes based upon that review. This is a great suggestion that is
already on-going. This month we will have a presentation on rate effectiveness
based upon data from 2017 consumption and billing.

6. Expand
Education Initiatives. This recommendation is the one which surprised us
the most. The Council recommended that we use multiple media outlets and create
a speaker bureau which would allow us to provide energy usage and savings
advice to a wide variety of meetings and groups throughout Glasgow. Honestly,
we felt we were already doing that, and, a lot of the feedback we have been
getting has been negative as many folks feel they do not need to be educated.
However, since we accepted this recommendation, and since you instructed me to
redouble our efforts to educate our customers, we are on the case. We have
already conducted, two full blown educational sessions lead by Jeff Christian,
a former director from Oak Ridge National Laboratory, and someone considered to
be an expert in the energy efficiency field. The event was heavily advertised
with special arrangements for transportation via city bus and individual
transport for those with transportation needs. Mr. Christian did a fantastic
job speaking at the two forums on August 31, however, less than 30 total
customers attended. Other educational efforts will continue.

Insurance
Package Rate Stabilization Offer

We have been buying our
Workers’ Compensation and General Liability insurance coverage from Kentucky
League of Cities for several years. Every so often we have solicited competitive
bids for our coverage, but we have never gotten a competing offer that was
attractive compared to the coverage and the service we get from KLC (they are
represented locally by Pedigo-Lessenberry).

Recently they made an
offer to effectively freeze our rates until 2020 if we enter into an agreement
with them to stay with them for two more years. We are inclined to recommend
that we accept this offer. The down side would be that if you decided to direct
me to write specs and solicit competitive bids again, we would not be able to
do that until 2020. I look forward to your thoughts on this matter at the
meeting.

Conclusion

Well, that ought to be
more than enough to set your head to spinning for this month. Let me know if
you have any questions before the meeting.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Wednesday, January 17th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

We have just
given EPB internet customers a New Year’s gift! The 12 MB internet service was
just upgraded to 15 MB and the 40 MB service just got kicked up to 50 MB! These improvements
will improve all your internet activities, and the really cool part is that
there is no additional charge.

In order enjoy this upgrade, all you
must do is reboot your cable modem. Just
unplug the power, wait 30 seconds, and plug it back up. Once the modem comes
back on-line you will have the newly upgraded speeds. That’s it!

Enjoy this
latest upgrade from Glasgow EPB, as we continue our tradition of bringing you
the future…faster!

In a Special Meeting on Thursday, January 4, 2018, Glasgow
EPB board members met to again consider the matter of paying the rate increase
demanded by WHAS, or, in the alternative, dropping the channel. The Board had
already decided to drop WSMV and WTVF on January 1, but was still considering
the final offer from WHAS until the Special Meeting.

This was a very difficult decision to make. The Board was
faced with a necessary rate increase of $2.95 per month if all three broadcast
channels (likely to take effect in April) were removed, or an increase of about
$6.20 per month if WHAS’s offer were accepted. The Board was evenly split on
the question, with half of the Board feeling that keeping access to a Kentucky
based broadcast station like WHAS, essential for EPB customers to keep fully
abreast of Kentucky news, weather, and sports. The other half of the Board was
more focused on the need to keep the cable rate increases smaller by dropping
some channels who have asked for the largest rate increases, leaving customers
the option of getting the Louisville news programming from streaming video
sources. Eventually, the tie was broken by the Board Chairperson, who voted to
drop WHAS in favor of lower rates.

This decision will become effective Monday, Jan. 8th, when
the cable lineup will be altered as follows:

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Friday, January 5th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Tuesday, January 2nd between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.